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Buying a Home With a Non-Spouse

February 25, 2019 · 6 minute read

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Buying a Home With a Non-Spouse

Buying a home all by yourself can be both hard and expensive. But, sometimes for people who are either not married, or have no a significant other in tow, it may be the only option.

While buying a house with someone you’re not married to may lessen the financial burden, it can often be more complicated than buying a house alone or with a spouse. That doesn’t mean that it can’t be done, though.

Anything can happen between two people, of course, but it’s a good idea to start with a foundation of trust and communication. Is this a person you’ve had detailed money conversations with?

If the foundation with your friend or significant other feels solid, the next step is to talk through all of the “what-ifs” involved in home co-ownership such as “What if someone wants to move out?”

These conversations will guide your decision on how to divvy up responsibility, title the property, and create a legal co-ownership agreement. Below, we’ll guide you on how to have all of those conversations.

If you’re buying a house with a boyfriend or buying a house with a girlfriend or someone who’s just a friend, here are a few things to know.

Is It Harder to Get a Mortgage?

One of the most common questions when thinking about buying a house married vs. unmarried is whether it will affect the mortgage rate made available by the bank. But a more important consideration is whether this person has a financial history that qualifies them for a mortgage.

Most banks typically underwrite each individual on the home loan, making marital status irrelevant. This can be a good or a bad thing, depending on the qualifications of each of the applicants. More important than whether two people are married is if they have good credit scores and solid incomes.

When determining a rate for two signers, most banks will likely pull credit information for both. Each person has three official credit scores (although every bank has its own formula).

Then, the bank will use the lower of the two scores to determine the interest rate. Simply put, the weaker link of the two of you will most likely determine the rate at which you can borrow money as a duo.

Here’s the thing: Even subtle changes in interest rates could result in the difference of thousands or even tens of thousands of dollars over time. Before you go into a shared mortgage with anyone, a good first step is to understand where they’re at financially and the impact that will have on a potential home loan.

In preparation for marriage, you’re ideally having conversations about money as a part of the getting-to-know-you process. This may not be the case for folks who aren’t married, but it should be.

If you’re buying a house with a boyfriend or buying a house with a girlfriend or someone who’s just a friend, get nice n’ comfy talking about financial data points such as how much student and consumer debt you both have and current monthly income and debt payments.

Not only are these specs just plain good to know about your co-owner, but they’ll affect your credit score (and therefore, the interest rate on your mortgage).

Ask the Tough Questions

Making a major purchase with another person is a big deal, and it should be treated as such. Before the papers are signed, there should be several sit-down conversations about how financials and responsibilities will be split and resolutions to possible what-if scenarios.

These conversations are arguably even more important for non-spouses to have than married people (although they are important for both). Married couples often merge their finances and operate as a single unit, whereas friends likely wouldn’t do such a thing. Because spouses are pulling from the same pool of money, they don’t generally mind “covering” the other person if they can’t make a payment one month.

Here’s a list of questions to answer before moving forward with a co-ownership agreement:

•  Who pays for the down payment? If one person pays for the down payment, is the other person paying them back?

•  Will all other costs, including the mortgage, repairs, utilities, insurance, and property taxes, be split evenly? If not evenly, then how will they be divided up?

•  Regardless of how the costs are broken down, how will ownership of the house be divided?

•  Does one party have a significantly better or worse credit score?

•  What happens in the event that one of you loses your job or cannot make mortgage payments?

•  What happens in the event that one person dies or becomes disabled?

•  What happens if one of you gets a great job opportunity in another city and decides to move away?

•  If one person leaves the home and the loan is refinanced to remove one of the signers, who pays for the cost of refinancing?

•  Will time spent on home maintenance and repairs be split evenly? If one housemate is handier, will that person be compensated for their time spent working on the home?

After having these conversations with your friend or significant other and you feel ready to move forward with home-buying, the next step is to determine what type of title is appropriate for your situation.

Choose the Right Title

From an ownership standpoint, there’s more than one way for two people to own a house. There will be some variety between states, but most offer the following two options:

Joint Tenants (With Rights of Survivorship)

Under this agreement , both tenants own 50% of the house. If one of the tenants dies, their share of ownership passes directly to the surviving party. There is no legal intervention when this happens.

The trouble with this option is that it only accounts for how the home will pass between owners upon death. It says nothing about what happens if a person wants to leave the arrangement. If one of the two signers would like to be removed from the agreement, will they be able to buy the remaining owner out? Or will the house need to be sold? Either way, it might be necessary to get a lawyer involved.

Tenants in Common

This arrangement allows for unequal ownership. For example, you could own a 70% stake while your friend owns 30%. If a tenant dies, the ownership passes to their heirs—which may not be the other tenant. It is certainly possible to designate your co-owner as your heir if this is what you want, but an additional trust or legal document might be necessary.

In the event that home passes to heirs that are not the co-owner, such as a family member, what happens? Would the tenant buyout the heirs for their share of equity in the home? Would they agree to sell the house and split the proceeds, requiring the tenant to move?

A third option is sole ownership, which isn’t a perfect solution either. Just as it sounds, this means that only one person is on the title and therefore only one person has legal ownership. While this may make sense in some scenarios, the person left off the title risks walking away with nothing if things go sour.

Consider a Contract

Remember all of those questions from earlier? Whatever conclusions you came to, it’s probably a good idea to put them into a legally binding document.

Here’s another big difference when buying a house married vs unmarried. A married couple may have a prenuptial agreement that designates what happens to jointly owned assets in the event of death or divorce.

Unmarried people won’t have this same opportunity, so they’ll need to hire a legal professional to help create an independent home co-ownership contract that spells out a plan for all potential scenarios.

Yes, this adds an extra layer to the process, but may be worth it for the protection it provides. Such a document could ultimately save you from messy legal trouble. The truth is, living with someone isn’t easy, no matter how reasonable you both are.

Don’t feel bad for wanting to make plans no matter how chill your friend, boyfriend, or girlfriend may seem. Life happens. People change. Hopefully you won’t grow apart, but it can be a good idea to put something in place just in case.

Buying a house with a non-spouse can be a tricky situation to navigate. If you have questions, a financial professional from SoFi can help. We offer financial help from our team of financial planners at no cost. You can set up an appointment at any time.

If you are ready to purchase a home, SoFi offers mortgage loans with competitive rates, no hidden fees, and as little as 10% down on loans up to $3 million. Plus, if you have any questions throughout the process, our mortgage loan officers (MLOs) can guide you through the process.

Find your rate to get started.


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